Sender v. Cygan

The Supreme Court was asked to respond to a certified question posed by the United States Bankruptcy Court for the District of Colorado. The question arose out of an adversary proceeding in which the plaintiff, in his capacity as Chapter 7 Trustee, sought to assert his "strong arm" powers under 11 U.S.C. § 544(a)(3) to avoid the defendants' security interest in the debtor's property and to recover the property for the benefit of the estate. At the time the bankruptcy petition was filed, the defendants' security interest was documented in a deed of trust that was recorded and properly indexed in the City and County of Denver, where the encumbered property is located. The recorded deed identified the encumbered property by a correct and complete street address and expressly referred to an attached legal description of the property. The recorded deed, however, omitted the referenced attachment. The Trustee contended that because the recorded deed of trust did not contain a legal description of the encumbered property, it failed to provide sufficient notice of the defendants' security interest to a subsequent purchaser of the property under sections 38-35-109(1) and 38-35-122, C.R.S. (2011). The Supreme Court held that, under the circumstances of this case, actual knowledge could not be imputed to the trustee, and the deed of trust did not otherwise provide sufficient notice of the defendant's security interest in the debtor's property. The supreme court answered the certified question in the negative and returned the case to the United States Bankruptcy Court for the District of Colorado for further proceedings. View "Sender v. Cygan" on Justia Law